US Dollar Index: DXY depicts pre-data anxiety near 13-day top above 103.00, Fed inflation gauge eyed

• US Dollar Index retreats from intraday high, prods two-day winning streak.
• Market sentiment dwindles as China prints mixed PMIs, cautious mood ahead of key US data prevails.
• DXY eyes the second consecutive weekly gain as Fed Chair Powell advocates two rate hikes in 2023, US statistics strengthen.
• US Core PCE Price Index, headlines about central banks and China will be important for intraday directions.

US Dollar Index (DXY) bulls take a breather at the highest level in a fortnight as market positions for the Fed’s preferred inflation gauge during early Friday. In doing so, the greenback’s gauge versus the six major currencies remains sidelined around 103.30 after rising in the last two consecutive days, retreating from the intraday high of late.

In addition to the pre-data anxiety, the absence of disappointment from China’s official activity data also tests the DXY bulls. That said, China’s headline NBS Manufacturing PMI matches 49.0 market forecasts in June versus 48.8 expected while the Non-Manufacturing PMI rose past 50.2 analysts’ estimations to 53.2, compared to 54.5 previous readings, during the said month.

Even so, hawkish Federal Reserve (Fed) comments and upbeat US data keep the US Dollar on the bull’s radar, especially amid the firmer US Treasury bond yields.

In his recent public stunts, Fed Chair Jerome Powell advocated for two more rate hikes in 2023 while Atlanta Federal Reserve President Raphael Bostic flashed mixed signals but stayed hawkish overall.

That said, the final readings of the Gross Domestic Product (GDP) Annualized, mostly known as the Real GDP, grew at the 2.0% rate for the first quarter (Q1) of 2023 versus the 1.3% initial estimation. Further, the US Weekly Initial Jobless Claims slumped to 239K for the week ended on June 23 compared to 265K expected and revised prior. However, the Personal Consumption Expenditure (PCE) Price for Q1 2023 eased to 4.1% QoQ from 4.2% expected and prior whereas the Pending Home Sales slumped to -2.7% MoM for May compared to 0.2% expected and -0.4% prior (revised).

It should be observed that mixed headlines about the US-China ties also poke the DXY bulls as US Treasury Secretary Janet Yellen ‘hopes’ to visit China to re-establish contacts but also showed readiness to take actions to protect national security interests even at an economic cost.

Against this backdrop, the S&P500 Futures print mild gains whereas the US 10-year and two-year Treasury bond yields seesaw at the highest levels since early March, marked the previous day.

Looking forward, the Federal Reserve’s (Fed) favorite inflation gauge, namely the US Core Personal Consumption Expenditure (PCE) Price Index, for May, will be in the spotlight.  It should be noted that the US Core PCE Price Index is likely to remain static at 0.4% MoM and 4.7% YoY, which in turn may allow the Fed to keep its hawkish bias and fuel the DXY.

Technical analysis

A daily closing beyond the 100-DMA, around 103.05 by the press time, keeps the US Dollar Index (DXY) buyers hopeful of challenging a six-week-old horizontal resistance area around 103.55-65.